Who Gets The Insurance Money?

Let’s say a Grand Prairie business, or one in Arlington, Fort Worth, Dallas, Weatherford, or anywhere else in Texas, gets sued and a judgement is rendered against them. Does the sued business’ insurance company pay the money to their insured to handle or to the person who sued their insured to resolve the judgement?
This was the issue in a lawsuit recently ruled on by The Honorable Senior District Judge, A. Joe Fish. This case, was decided on April 5, 2010, in the United States District Court, N.D. Texas, Dallas Division. The style of the case is, Mark Rotella and Mark Rotella Custom Homes, Inc. d/b/a Benchmark Custom Homes v. Mid-Continent Casualty Company.Mark Rotella and Mark Rotella Custom Homes, Inc. d/b/a Benchmark Custom Homes (Benchmark) were sued by Joan Cutting (Cutting) for numerous reasons including, construction defects in her home, fraudulent billing practices, and breach of contract. Cutting prevailed in the underlying suit and obtained a judgement for $2,671,187.26 in actual and treble damages, $336,342.59 in attorneys’ fees, and $191,189.95 in pre-judgement interest, post-judgement interest, and costs. The immediate lawsuit resulted between Benchmark and Mid-Continent Casualty Company (Casualty) over the obligations of Casualty under the policy of insurance they had with Benchmark.
While this second lawsuit was going on, (the facts get a little complicated) Casualty paid Cutting monies in exchange for Cutting signing a complete release on the judgement obtained against Benchmark. Benchmark then sued Casualty saying that Casualty should have paid the monies on the judgment to Benchmark so that Benchmark could get the release from Cutting.
Following here are some of the points the Court made in its analysis of this case. The Court stated that in a case like this, the insurance company, Casualty, had an obligation to pay damages until the judgment is satisfied. That one way a judgment can be satisfied is by obtaining a valid release from the judgment creditor, Cutting, which they did. The Court ruled that when a judgment creditor accepts money in complete satisfaction and release of his judgment, that judgment has no further force or authority. The Court found that Casualty has performed any duty it might have to indemnify Benchmark for the harm caused by Benchmark, to Cutting. And that Casualty satisfied that duty by obtaining a valid release of judgment from Cutting. Thus Benchmark no longer had an obligation to Cutting and therefore Casualty no longer had a duty to Benchmark.
This case is interesting to read and understand. It explains in an understandable manner the obligations that arise in a situation such as this, where the insurance company initially refused to defend its insured but later satisfied the judgment that was taken against their insured.